3 Dividend Stocks That Have Made Monster-Size Rate Hikes This Year

Dividend growth stocks are better than your average income investment because their payouts increase over time. That gives investors plenty of incentive to buy and hold. For example, if a company were to raise its dividend by 5% in each of the next five years, your investment income from that stock would be 28% higher than it is right now.

Some stocks, however, have been making even larger increases in just one year. Zoetis (ZTS 1.64%), Dollar General (DG -0.36%), and Lowe's (LOW -0.14%) significantly boosted their dividend payments within the past year. And their payouts aren't excessively high or risky, either.

1. Zoetis

Zoetis is a healthcare company that makes medicines and vaccines for animals in 100-plus countries around the world. In addition to common pets such as cats and dogs, it also helps treat livestock. Business has been strong. Consumers have been buying pets amid the pandemic to accompany them during lockdowns, and they've generally been spending more time at home.

For Zoetis, that has led to more demand and higher sales numbers. Last year, the company's revenue totaled $7.8 billion and rose 16% year over year. That's far greater than the 6.6% growth it achieved in the previous year. Due to its stronger financials, Zoetis announced a 30% increase to its dividend late last year, along with a plan to repurchase $3.5 billion worth of shares.

Zoetis' current dividend yield remains modest, however, at 0.8% (the S&P 500 averages a yield of around 1.5%). But with a payout ratio of 26%, Zoetis has room to make more rate hikes in the future. Its quarterly dividend of $0.325 is double what it was paying back in 2019.

For income investors, this can be a potentially attractive stock to hang on to for the long haul since Zoetis provides essential products and services to both pet and farm owners.

2. Dollar General

In March, Dollar General, which operates more than 18,000 general stores in 47 states, announced a 31% increase to its dividend to $0.55 every quarter. The news came as the company released its fourth-quarter results for fiscal 2021 (ended on Jan. 28). Although its same-store sales for the full fiscal year were down 2.8%, when compared to two years ago and before the effects of the pandemic and stimulus payments, that number was up 13.5%.

The company's confidence in the year ahead led to a significant increase in the dividend. With the bump in the payment, the yield is up to around 0.9% and the company's payout ratio remains incredibly modest at less than 20%. That's good news for dividend investors because it means that not only is there a good buffer there, but if Dollar General does well, there could continue to be generous rate hikes in the future. Its dividend payment is 90% higher than the $0.29 it was paying at the start of 2019.

Dollar General is another solid option for income investors looking to get a mixture of both stability and a dividend with significant potential to rise over the years.

3. Lowe's

Lowe's is a strong brand in home repair and has close to 2,200 stores across the U.S. and Canada. The business makes for a solid long-term investment, especially when you factor in its dividend. The popular retailer raised its dividend by 31% back in May as business has been good. The Dividend Aristocrat has an impressive track record of paying dividends consistently since its business went public in 1961.

At $1.05 per share, Lowe's quarterly dividend now yields around 2%, making it the highest on this list. Its dividend is now more than double the $0.48 it was paying back in early 2019. And at around 27%, its payout ratio is also incredibly safe.

Although there was an influx of spending on home repair and upgrades during the depths of the pandemic when consumers were at home more, Lowe's sales numbers remain strong even with a return to more typical conditions. For the three-month period ended July 29, the company's net sales of $27.5 billion were flat from a year ago, as were profits of about $3 billion. For the full year, the business doesn't expect huge numbers and even thinks sales could decline by up to 1%.

Even if Lowe's doesn't experience a surge in sales, its financials are strong enough to ensure that more dividend increases are likely over the coming years. For investors who crave long-term stability, this is yet another solid investment option to load up on right now.